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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuWall Street has recently been able to put inflation worries on the back burner, as traders focused instead on the U.S. midterm elections and wild swings in tech stocks. That’s over now. The consumer price index rose 0.4% in October from September. That’s more than a Dow Jones consensus estimate of a 0.3% increase. The numbers, coupled with earlier comments from Federal Reserve Governor Christopher Waller, have some traders suddenly pricing in a supersized half-point interest rate increase in December. The CME Group’s FedWatch tool shows there’s an 11% chance of a 50 basis-point hike in December, up from zero a week ago. Expectations for a quarter-point increase stand at 88%, up from 77% a week ago. “The consumer’s inflation nightmare continues on at the start of the fourth quarter with no relief in sight where this month’s grocery bills have jumped and the cost of dining out is sky-high,” said Christopher Rupkey, chief economist at FWDBonds. “Inflation is not rolling over and playing dead and Fed officials are going to need to bring a bigger hose if they have any hope of putting the inflation fire out.” “Sell stocks, sell bonds, sell it all,” Rupkey added. Traders heeded such warnings in early trading. Equities took a hit following Tuesday morning’s inflation release. The benchmark 10-year Treasury note also dropped, pushing up its yield nearly 10 basis points, to 4.95%. Here’s what other strategists, economists and investors on the Street had to say: Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management: “Hot CPI Signals Fed Hikes Could Spill into 2027.The Fed could push for a more-aggressive tightening cycle with CPI continuing to print strong. A December hike is our firm base case despite wider AI jitters, and stubborn inflation means we cannot rule out further hikes in 2027.” Chris Zaccarelli, chief investment officer for Northlight Asset Management: “Given the higher-than-desired inflation, it is even more likely now that the Fed will raise rates in December and although some are calling for a 0.5% increase in the Fed Funds target rate, we expect that they will only raise rates by 0.25% next month.” Ian Lyngen, head of U.S. rates at BMO: “Overall, the combination of strong October payrolls and sticky core-CPI suggests that not only is a December hike a foregone conclusion, but also that as Waller suggests, a 50 bp hike will be discussed in the context of ensuring Fed credibility. From here, the market will continue to cheapen up the front-end of the curve as a nonzero probability of a 50 bp move is priced in. The market will also need to take down this afternoon’s 10-year refunding auction — the data response has contributed to a supply concession of sorts.” Bret Kenwell, U.S. investment analyst at eToro: “Markets have handled elevated Treasury yields and a stronger U.S. dollar better than many investors expected. But that resilience could be tested if markets begin pricing in multiple rate hikes and yields move higher in response. The bigger risk is not simply higher yields, but a higher rate path.” Skyler Weinand, chief investment officer, Regan Capital : “Tuesday’s CPI was stronger-than-expected, which sets the stage for another rate hike in December, as it’s clear the Federal Reserve can’t ignore the obvious uptick in the inflation data. Voters expressed their frustration with inflation and rising prices in the midterm elections, so the Fed must follow through in raising interest rates to curb further inflation.” Karen Manna, fixed income investment strategist at Federated Hermes: “This was the report the market could least afford to see. A hotter inflation print raises fresh questions about whether the Fed has done enough to contain price pressures and reinforces the risk that interest rates need to move higher and stay there for longer. With December’s meeting on the horizon, this report strengthens the case for another rate hike and puts even more pressure on policy makers to remain vigilant.” Josh Hirt, senior U.S. economist at Vanguard: “While overall inflation has moderated little, its composition has shifted considerably. Underneath these outsized shocks, the economy appears to be behaving more in line with the Fed’s objectives, making modest policy adjustments sufficient to restore price stability while preserving labor-market balance.” Jeff Schulze, head investment strategist at Franklin Templeton Institute: “Today’s release will be a headwind to risk assets as investors price the possibility of a 50bp hike in December and additional hikes beyond, with higher front-end yields and a stronger dollar weighing on equity valuations.” Daniel Siluk, global head of short duration & liquidity and portfolio manager at Janus Henderson: “With inflation momentum moving in the wrong direction and underlying pressures proving persistent, policymakers may need to signal both a higher rate path and a greater willingness to keep policy restrictive for longer.” — CNBC’s John Melloy, Michelle Fox, Deena Zaidi, Ananya Chetia and Liz Napolitano contributed reporting.Read More